Fed's Tough Spot: Balancing Unemployment & Inflation

Fed Rate Decision Looms: Balancing Act Between Inflation and EmploymentThe Federal Reserves policy committee is set to meet on January twenty-seventh and twenty-eighth, with expectations of keeping the key interest rate steady after recent cuts. Fed Chair Jerome Powell acknowledges the challenging situation, where risks lean higher for both unemployment and inflation, making it difficult to address both with the primary tool. Markets anticipate an eighty percent chance of no change, as per fed funds futures data. This pause allows officials to monitor if inflation or job losses become the more pressing concern. For consumers, the fed funds rate influences borrowing costs on credit cards, car loans, and mortgages. Lower rates stimulate spending and growth, but maintaining the rate now aims to curb persistent inflation without triggering stagflation, a combination of weak jobs and high prices. Inflation hawks, like Cleveland Fed President Beth Hammack, advocate for patience, citing inflation rates exceeding the two percent target for nearly five years, accelerated by tariffs this year. Hammack is skeptical of recent softer inflation data, attributing it to government shutdown distortions, and prefers clearer signs before any action. Dovish voices argue for cuts to support jobs, but the base case is steady rates for the foreseeable future. The upcoming meeting will provide insights into how the Fed navigates these competing pressures in the coming year.The Daily News Now! — Every city. Every story. AI-powered. Hosted on Acast. See acast.com/privacy for more information.